ESR Finalises $522M Buy-Out of Australia’s Propertylink

Warburg Pincus-backed ESR has clinched a deal to buy out Sydney-based real estate investment manager Propertylink in a deal that values the Australian company at A$723.4 million ($522.51 million), according to an announcement by Propertylink to the Australian stock exchange.

Propertylink on Monday revealed a binding agreement with ESR that agrees to an offer from the Hong Kong-based warehouse developer and fund manager to buy out the stake that it doesn’t already own in the Aussie real estate firm, and follows a month of due diligence by ESR.

The agreement for the off-market takeover bid follows more than a year of maneuvering by the Pan-Asian warehouse investment platform and its Aussie head Phil Pearce, to expand the company’s footprint in the Asian market.

Offer Boosted by Over 4%

“The Directors of Propertylink are pleased to have entered into a binding Bid Implementation Agreement with ESR,” Propertylink’s chairman, Peter Lancken said in the statement. “ESR’s Offer provides Propertylink security-holders an opportunity to realise certain value for their Propertylink securities, at an attractive premium to Propertylink’s trading price prior to the receipt of ESR’s initial proposal and NTA.”

According to the company’s filing, the agreed offer price of A$1.202 is 4.3 percent higher than ESR’s initial offer price of A$1.15 in September, and represents a 14.3 percent premium to the closing price of Propertylink securities at 20 September 2018, being the day prior to the announcement of ESR’s initial proposal to acquire Propertylink.

The offer price also represents 15.2 percent premium to the six-month volume weighted average price of Propertylink securities to 20 September 2018 of A$1.04.

Buyout Ends Competition for Centuria

The offer is, however, subject to a number of conditions which include minimum acceptance of at least 50.1 percent of all Propertylink securities, no material adverse change, no prescribed occurrences, no regulatory action or material acquisitions, disposals, capital expenditure or change in the conduct of business.

ESR, which already owns 19.9 percent of Propertylink, launched a A$693 million ($505 million) all-cash offer for Propertylink in September on the condition of a peaceful settlement to a year-long battle between Propertylink and ESR for control of Aussie industrial REIT, Centuria.

Propertyllink gave its tick of approval to ESR’s offer one month later in mid October. In doing so, Propertylink agreed not to proceed with its non-binding, indicative proposal, worth A$755 million, to acquire Centuria Industrial REIT, in which ESR also holds a 14.9 percent stake.

Centuria, which controls an A$1 billion property portfolio of industrial and logistics centres as well as owning 9.3 percent of Propertylink, had its own ambition to take over Propertylink a year ago, before Propertylink rebuffed that effort.

ESR Builds Australian Presence

Underpinning the tangled world of inter-connected shareholdings was the players’ desire to get access to high-quality industrial assets backed by the rise of the e-commerce sector and strong demand for warehouse facilities. Land values and rents for logistics assets in Australia were near all-time highs, particularly along the country’s eastern seaboard, suggested The Sydney Morning Herald.

ESR formally entered the Australian market in July when it acquired the Commercial and Industrial Property (CIP) platform along with its management team from real estate investment firm Charter Hall for A$102.5 million.

The acquisition gave ESR the substantial Australian presence that it has been looking for since at least early 2016 when it entered ultimately unsuccessful discussions with Aussie industrial developer Goodman Group for the purchase of a set of three Australian logistics portfolios worth some A$1 billion.

Pearce, who became chief executive of ESR Australia in July as part of the CIP investment, said to The Sydney Morning Herald in a recent interview that the launch of ESR Australia underlines ESR’s commitment to a long-term presence in Australia.

“Fundamentally, the outlook of the Australian industrial property market is as good as it gets and ESR plans to be a long-term player here. Property is always a good hedge against inflation and gives strong capital returns,” he added.

ESR Keeps Up Growth Pace

ESR took its current form in January 2016 through the merger of two of the region’s fastest-growing warehouse developers, Shanghai-based e-Shang and Singapore’s Redwood Group.

Backed by some of the world’s leading pension funds and investment managers, including APG, CPPIB, Goldman Sachs, PGGM, Ping An and SK Holdings, ESR has over 10 million square of projects owned and under development across China, Japan, Singapore, South Korea and India. The company also runs capital and fund management offices in Hong Kong and Singapore.